1. Background of Conducting Forward Foreign Exchange Settlement Business
In the context of the two-way fluctuation of the RMB exchange rate and the market-oriented interest rate environment, to effectively avoid foreign exchange market risks and prevent significant exchange rate fluctuations from adversely affecting the company, as well as to improve the efficiency of foreign exchange fund utilization and reasonably reduce financial costs, North Chemical Industry Co., Ltd. (hereinafter referred to as "the Company") plans to conduct forward foreign exchange settlement business for hedging purposes based on actual development needs.
2. Overview of Conducting Forward Foreign Exchange Settlement Business
(1) Main Currencies Involved
The forward foreign exchange settlement business conducted by the Company is limited to the main settlement currency used in its production and operations, which is the US dollar.
(2) Total Funding Scale
Based on actual business needs and adhering to the principle of prudence, the forward foreign exchange settlement business will not exceed 70% of the annual export revenue and will not exceed 30% of the Company's most recent audited net assets. The total amount within 12 months from the date of board approval will not exceed $30 million, with a maximum position size of $8 million. The Company will not need to invest other funds apart from a certain percentage of margin paid according to agreements with relevant financial institutions (if required), and this margin will be funded by the Company's own funds, not involving raised funds.
(3) Counterparties
The counterparties will be financial institutions approved by the State Administration of Foreign Exchange and the People's Bank of China, which have the qualifications to conduct forward foreign exchange settlement business.
(4) Authorization and Duration
Given that foreign exchange hedging business is closely related to the Company's production and operations, the board of directors authorizes the general manager to implement relevant matters, including but not limited to: selecting qualified trading institutions, approving daily foreign exchange hedging business plans, signing contracts or agreements, etc. The authorization is valid for 12 months from the date of board approval.